SANATAN DHARAM SHIKSHA SAMITTEE,HARYANA vs. ITO (EXEMPTIONS), ROHTAK

PER O.P.MEENA, AM: 1. This appeal by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals), Rohtak, dated 25.10.2016 for the assessment year 2010-11.

Sanatan Dharam Shiksha Samittee Vs. ITO,(E), Rohtak/ITA No.871/Del/2017 for A.Y. 2010-11 Page 2 of 18

order was received on 02.11.2016 against which the appeal was to be

filed within the statutory period, however, the same has been filed on

15.02.2017. Therefore, there is delay by 41 days in filing of the

appeal. The assessee in its petition stated that the assessee trust has

received the appeal order on 02.11.2016 and handed over the same

to one of the clerks working on the office of its Chartered Accountant

to draft the appeal to be filed before the ITAT. However, the said clerk

kept the above order in his drawer and forget to file the appeal in the

above-mentioned case. Later on, when the assessee enquired from its

Chartered Accountant regarding the status of his appeal to be filed

before the ITAT, it came in the light that at that the clerk to whom the

order was handed over has not filed the appeal against the order of

the ld.CIT(A). Thereafter, the appellant has taken immediate steps

and filed the appeal before the ITAT with 41 delay. Thus, the delay

has been caused due to unavoidable circumstances and beyond the

control of the assessee. Therefore it was requested that the delay in

filing of the appeal may be condoned as it was unintentional and

beyond the control of the assessee.

the delay.

available on record. It is a settled law that the courts as quasi-judicial

Sanatan Dharam Shiksha Samittee Vs. ITO,(E), Rohtak/ITA No.871/Del/2017 for A.Y. 2010-11 Page 3 of 18

bodies are empowered to condone the delay, if the litigation satisfies

the court that there were sufficient reasons for availing the remedy

after the expiry of the limitations. Since, the assessee trust in had

handed over the order of CIT (A) to the clerk of Chartered Accountant

for filing of appeal, but that clerk from the office of Chartered

Accountant has forgotten to take appropriate action in the matter

within the time. It was only when the assessee contacted to its

Chartered Accountant, this facts was noticed and appeal was filed

with 41 days of delay. We find that the explanation provided by the

assessee is satisfactory and reasonable and there was no malafide

intention or negligence on the part of the assessee in filing of the

appeal. Therefore, we condoned the delay of 41 days in filing of

appeal and allow the appeal be admitted for decision on merit.

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all material facts necessary for its assessment as provided in the first proviso to section 147 of the Act.

u/s.147 of the Act and issue of notice u/s.148 based on audit report,

which is bad in law and without application of mind and amounts to

change of opinion.

educational institution and assessed as AOP. The assessee has filed

its return of income on 30.09.2010 disclosing income at Rs. Nil and

it was processed u/s. 143(1) of the Act. Later on, the case was picked

up for scrutiny and the assessment was made u/s.143 (3) on

23.11.2012 assessing the income at Nil (as returned). Thereafter, the

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AO noticed that the assessee was not eligible for exemption

u/s.10(23C)(iiiab) of the Income Tax Act. Accordingly, a notice

u/s.148 was issued on 31.03.2015 after recording the reasons

(reproduced in the body of assessment order) and after taking

approval of JCIT (E) Chandigarh. In response notice under section

148 of the Act, the assessee vide letter dated 20.04.2015 submitted

that the original return filed by it may be treated as return filed in

response to notice u/s.148 of the Act. Accordingly, statutory notices

u/s.143(2) and 142(1) of the Act were issued and the assessment was

made u/s.143(3) r.w.s 147 of the Act on 17.12.2015 thereby

disallowing the exemption of Rs.17,07,726/- claimed

u/s.10(23C)(iiiab) of the Act.

(A) challenging the reopening of the assessment on the ground that it

was reopened based on audit objection and it amounts to mere

change of opinion, therefore, it was not warranted under the Law.

Reliance was also placed on the decision of CIT vs. Lucas TVS Ltd.,

[2001] 249 ITR 306 (SC) wherein it was held that a opinion of the

audit party regarding application or interpretation of law is not

information, and as such, a reassessment based on opinion of audit

party is not valid. It was further contended that the AO while framing

assessment u/s.143(3) has considered the fact about the assessee

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being charitable, existing solely for educational purpose and

substantively financed by the Government, and therefore allowed

exemption to the assessee u/s.10(23C)(iiiab) of the Act. Thus, no new

facts had come in to the possession of the AO, on which notice under

section 148 of the Act has been issued. Hence, it amounted to mere

change of opinion, which is not warranted and tenable under the Law.

Reliance was also placed on the decision of Apex Court in the case of

ACIT vs. ICICI Securities Primary Dealership Ltd. [2012] 348 ITR 299

(SC) wherein it was held that where the assessee had disclosed full

details in the return of income in the matter of dealing on shares and

the assessment was reopened after four years rejecting the assessee’s

contention that the loss incurred was a business loss and not a

speculative loss. It was clearly a change of opinion and the order of

reopening assessment was not tenable. Reliance was also placed on

plethora of case laws, which finds mentioned at page 3 of the order of

ld. CIT (A). It was also contended that the AO failed to dispose-off the

objections raised by the appellant against the issue of notice u/s.148

of the Act, therefore reopening is not valid. It was further submitted

that sanction by the JCIT, as per provision of section 151 of the Act

has been accorded without application of mind, which is against the

spirits of the law and is unjustified and unwarranted. However, the

ld.CIT (A) observed that the perusal of facts on record prove that there

is no infirmity in the issue of notice u/s.148 of the Act, reasons have

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been duly recorded, approval by the JCIT (E) has been accorded as

per the procedure and the objections of the assessee for issue of

notice u/s.148 have also been dealt with. Therefore, the assessee’s

objections are based on surmises. Moreover, the AO has clearly stated

in his order that the assessee has received Government grant of

Rs.49,32,102/- only and its gross receipts are at Rs.2,23,78,924/-

which is only 22.03% of the gross receipts which is very much low

than 50% of gross receipts, hence, it is not wholly and substantively

financed by the Government and therefore the assessee is not entitled

to exemption u/s.10(23C)(iiiab) of the Act.

Tribunal. The ld.Counsel referred point no. 9 of the notice u/s.142(1)

dated 03.02.2012 issued by the AO [placed at Paper Book Page No. 1]

in the original assessment proceedings, wherein the AO has made a

specific query to substantiate the claim of exemption

u/s.10(23C)(iiiab)/(aaiiad) of the Act. In response to which, the

assessee has filed its reply vide letter dated 16.05.2012 [placed at

paper book, page 3 and 4] wherein vide point no. 8, it has been

explained that the assessee is an educational institution imparting

education under the different courses and program, substantively/

wholly financed by the Government, therefore it is well covered for

exemption u/s.10(23C)(iiiab) which stipulates that any university or

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educational institution existing solely for educational purpose and

not for the purpose of profit and which is wholly or substantively

financed by the Government. Therefore, it was contended that point

No. 9, 10 and 11 of impugned notice under section 142(1) were not

applicable. Therefore, the question of allowability of exemption

u/s.10(23C)(iiiab) was duly complied with by the assessee and the

ld.AO in his original assessment order passed u/s.143(3) dated

23.11.2012 has given his clear opinion duly accepting the claim of

the assessee in respect of exemption claimed u/s.10(23C)(iiiab) of the

Act. The ld. Counsel further referred the reasons recorded by the AO,

which are appearing in the assessment order at page 1, which says

that the assessee was not eligible for the exemption u/s.10 (23C)

(iiiab) of the Act as the assessee’s receipts were at Rs.2,23,78,968/-

and out of this grant of Rs.49,32,102/- only was received from the

Haryana Government, thus the assessee was not wholly or

substantively financed by the Government. Therefore, the assessee

was required to get approval u/s. 10(23C)(vi) or to get registered

u/s.12AA of the Act from the competent authority. The assessee has

not done the same. Therefore, an amount of Rs.17,07,726/- has

escaped assessment. The ld.Counsel contended that the AO has

already made enquiry on the allowability or exemption u/s.

u/s.10(23C)(iiiab), therefore, the reopening on the basis of same facts

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as verified in original assessment, amounts to change of opinion only

for which the assessee has placed reliance on the following case laws.

reopening of assessment u/s.148 of the Act are nothing but based on

audit note/objections raised by the Senior Audit Officer which could

not be taken as ground for reopening assessment. The copy of audit

objection raised by the auditor was filed which is placed at Paper

Book, page 10. Therefore, it was submitted that the reopening based

on audit objection is not a new information for reopening of the

assessment u/s.147 of the Act as held by the Hon’ble Supreme Court

in the case of CIT Vs. Lukas TVS Ltd., [2001] 249 ITR 306 (SC)

wherein it was held that an audit opinion in regard to the application

or interpretation of law cannot be treated as information for reopening

of the assessment u/s.147 (b) of the Act. Similarly, the Hon’ble Delhi

High Court in the case of CIT Vs. Simbhaoli Sugar Mills Ltd. [2011]

333 ITR 470 (Delhi) held that the assessee having made complete

disclosure of particulars before the AO in the assessment proceedings

u/s.143 (3), reassessment proceedings u/s.147 could not be initiated

beyond the period of four years, merely on the basis of internal audit

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report. Since, in the case of assessee, the particulars were already

available before the AO which were examined by him, hence, the

assessee had made complete disclosure of the particulars during the

course of the assessment proceedings u/s.143 (3), therefore,

reopening on the basis of Revenue audit objection is not permissible

in law as per the ratio laid down by the Hon’ble jurisdictional Delhi

High Court. Similarly, the ld.Counsel has placed reliance on the

decision of Hon’ble Jurisdictional High Court in the case of CIT-8 Vs.

India Iron Steel Company Ltd., [ITA No.88/2015 dated 13.02.2015]

wherein placing reliance on the decision of Hon’ble Delhi High Court

in the case of CIT Vs. Simbhaoli Sugar Mills Ltd., (supra) and after

applying the ratio of judgement of Hon`ble Supreme Court in the case

of CIT vs. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman

312 (SC) held that initiation of reassessment proceedings on the basis

of audit report objection is impermissible. The ld.Counsel also

supported his view by placing reliance in the case of Income Tax

Officer Vs. Shri Satya Prakash Agarwal and Sons [ITA

No.3792/Del/2011 dated 15.12.2013 of ITAT Delhi]. The ld. Counsel

further referred paper book page No.14, which is the sanction letter

for approval given by the JCIT(E) for issue of notice u/s.148 dated

31.03.2015 wherein it was mentioned “yes, I agree”. Thus, the

ld.Counsel contended that there is gross non-application of mind by

JCIT (E), Chandigarh and that the approval has been granted

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mechanically. In support of this view, the ld.Counsel has placed

reliance in the case of PCIT Vs. N. C. Cables Ltd. [2013] 391 ITR 11

(Delhi) wherein it was held that the “Competent authority to authorize

reassessment notice has to apply his mind and form an opinion, mere

appending of expression “approved” says nothing, it has to record

elaborate reasons for agreeing with the noting and at the same time

satisfaction has to be recorded of the given case which can be

reflected in possible manner.” The ld. Counsel further relied in the

case of CIT Vs. S. G. Lime and Chemicals Ltd., [CC.No.11961/2015]

wherein the Hon’ble Supreme Court has dismissed the Revenue

appeal and upheld the decision of Hon’ble Madhya Pradesh High

Court where the sanction authority being JCIT, has only recorded

approval as “yes, I am satisfied” for giving sanction for issue of notice

u/s.148 which was held to be invalid. The ld.Counsel further

submitted that various questions of allowability of exemption u/s.10

(23C) (iiiab) were asked during the course of original assessment

proceedings and duly complied with by the assessee. Even on merit,

the ld.Counsel submitted that the assessee has received gross receipt

of Rs.2.23 crore whereas Government Grant was at Rs.49.32 lakhs

which forms 22.03% of the total grants. The AO disallowed the

exemption u/s. 10(23C) (iiiab) on the ground that assessee trust has

not been substantively financed by the Government i.e. say that at

least 51% of the gross receipts should be received from the

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Government. However, the said percentage prescribed under the

Rule 2BBB of Income Tax Rules, 1961 has been inserted vide

notification no.79/2014 and came into force w. e. f. 12.10.2014 which

is after the date of assessment was under consideration, therefore,

the said Rule 2BBB is not applicable for the year under consideration.

In view of these facts, reopening based on this reason is also not valid.

The ld.Counsel has placed reliance on the following case laws in

support of this contention:

“CIT vs. Deshiya Vidya Shala Samithi, ITA No.1133 of 2008, Karnataka HC Jat Education Society vs. ITO, ITA No.2542 & 25463/Del/201, ITAT Delhi CIT Vs. Jat Education Society, (2016) 383 ITR 0355 P & H HC-41% Director of Income Tax (Exemption) Vs. Dhamapakasha Rajakarya Prasakta, ITA No.232, 235, 237 & 251/2009, (2015) 372 ITR 0307, Karnataka HC- CIT Vs. Indian Institute of Management, ITA No.529 of 2008, Karnataka HC- ACIT Vs. Amar Shaheed Baba Ajit Singh Jujhar Singh Memorial College, ITA no.1065/chd/2011, dated 20.0.2016, ITAT Delhi

examine the case of the assessee that whether the grant received from

state government were substantial and was more than 50% of the

gross receipts. Therefore, the allowability of exemption u/s. 10(23C)

(iiiab) was remained to be examined. Further, the assessee has not

obtained registration u/s.12AA and the application made for

registration u/s.12AA was rejected by the CIT, which has been

affirmed by the ITAT [ITA No.363/Del/2016 dated 31.07.2019] on the

ground that the by-laws of the society do not point out any charitable

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activity and objection of the assessee include purchase and sale of

immovable property as per societies needs. Further, the Tribunal

also observed that the assessee has purchased shops from its surplus

from where it is to receive the rental income. This shows that the

assessee is having commercial activities. Therefore, reopening of

assessment and denying the exemption is in accordance with law.

contention of the ld. D.R. that registration u/s.12AA has been

rejected is of no consequence as the reopening of assessment is solely

made on the ground of denial of deduction u/s. 10(23C) (iiiab) of the

Act, hence this contention has no bearing on the ground of reopening

of assessment.

available on record. The perusal of original assessment order passed

u/s.143(2) of the Act dated 23.11.2012 shows that the AO has duly

examined and scrutinized the details submitted during the course of

assessment proceedings and has applied his mind regarding

exemption u/s.10(23C)(iiiab) of the Act. The AO had obtained

necessary information and allowed the same by observing in para 2

of the assessment order which reads as under :

“2. The assessee is a public educational body constituted by the public in the year 1974-75 and is registered as a Society under the Society under

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the Societies Registration Act, 1860 vide No.64 of 1974-75 dated 12.11.1974. The assessee is running two schools at Narwana town of District Jind and is affiliated with Haryana Education Board, Bhiwani. The main object of the assessee, inter-alia include to run schools and to provide education to the general public at large. During the year, the assessee has declared Gross Receipts at Rs.2, 23, 78,964/- as per Income & Expenditure Account. The assessee was asked to substantiate its claim exemption under section 10(23C) (iiiab) of the I. T. Act, 1961. The assessee filed a written reply received on 21.11.2012, placed on record, contending, inter-alia, therein that it is an educational institution registered under Societies Registration Act, 1860 and solely exists for charitable purposes to run an educational institution. It was further stated that the institution is substantially financed by the Govt. of Haryana and complying with all the requirement as laid down under the section. Hence, income of the institution is exempt under section 10(23C) (iiiab) of IT Act, 1961. I have carefully considered the claim of the assessee. The institution solely exists for educational purposes and not for purpose of profit. The income is, thereof, exempt under section 10(23C) (iiiab) of the Act. Total income declared at NIL by the assessee is, therefore, accepted.”

supported by the reply furnished by the assessee in response to

notice u/s. 142(1) dated 03.02.2012 vide letter dated 16.05.2012

[placed at paper book page no. 3 and 4] and letter dated 21.11.2012

[placed at paper book, page no. 5 to 7]. Therefore, the assessee has

made compliance to the specific query raised by the AO to

substantiate its claim that the assessee exists solely for educational

purpose and substantively financed by the Government. Therefore,

there was no new material which had come into possession of the AO

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to form a belief that by reason of non-disclosure truly and fully all

material facts, necessary for assessment, the income chargeable to

tax has escaped assessment. The ld.Counsel has placed reliance on

the decision of Hon’ble Delhi High Court in the case of CIT Vs. Usha

International Ltd.[2012] 348 ITR 485 (Delhi) wherein by majority

view, it was held that “the assessment proceedings cannot be validly

reopened u/s.147 of the Act, even within 4 years, if an assessee has

furnished full and true particulars at the time of original assessment

with reference to the income alleged to have escaped assessment, if

the original assessment was made u/s.143(3). So long as the

assessee has furnished full and true particulars at the time of original

assessment and so long as the assessment order is framed under

section 143(3) of the Act, it matters little that the assessing officer did

not ask any question or query with respect to one entry or note but had

raised queries and questions on other aspect. Section 114(e) of the

Evidence Act can be applied to an assessment order framed under

section 143(3) of the Act, provided that there has been a full and true

disclosure of all material and primary facts at the time of original

assessment. In such a case if the assessment is reopened in respect

of matter covered by the disclosure, it would amount to change of

opinion.”

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change of opinion, as the assessee has disclosed full and true

particulars at the time of original assessment made under section

143 (3) of the Act. This view is further supported, by the decision of

Hon’ble Supreme Court decision as relied by the ld.Counsel in the

case of CIT Vs. Kelvinator India Ltd., [2010] 320 ITR 561 (SC) wherein

it was held that the AO has power to reopen the assessment u/s.147

provided AO has reason to believe that income has escaped

assessment and there is tangible material to come in to the

possession of the AO, that there is escapement of income, mere

“change of opinion” cannot per-se be reason to reopen the

assessment. In the present case, there is no new tangible material,

which had come into the possession of the AO, therefore, reopening

on the same material amounts to mere change of opinion, which is

not permissible under the law. Similarly, the ld.Counsel has placed

reliance in the case of Oriental Insurance Company Vs. CIT [2015]

378 ITR 421 (Delhi) wherein it was held that it cannot be disputed

that the exemption claimed by the AO in respect of the profit on sale

/redemption of investment was duly disclosed and the AO has also

opined on the merits of taxability of profits of sale / redemption of

investment. The income from profit on sale/redemption of

investments is now sought to be taxed as income, which had escaped

assessment. Thus, in our view, clearly represents a change in the

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opinion with regard to the taxability of the income in question. It was

well settled that the power under Section 147 of the Act is not a power

of review but a power to reassess. Permitting reopening of

assessment on a change of opinion as to the taxability of the income

of the Assessee is, thus, outside the scope of Section 147.

case on the basis of Revenue Audit Objection which does not

constitute an information for the purpose of reopening of assessment

as held by the Hon’ble Supreme Court in the case of CIT Vs. Lukas

TVS Ltd., (supra), CIT Vs. Kelvinator India (supra) and Hon’ble Delhi

High Court in the case of CIT Vs. M/s. India Iron and Steel Ltd., and

M/s. Xerox Modi Corp. Ltd., Vs. DCIT (2013) 350 ITR 300 (Del).

with effect from 12.10.2014, where the person having voting power

not less than 20% was deemed to have substantive interest in the

business of the company as per section 40(2)(a) of the Act as held by

the Hon’ble Karnataka High Court in the case of CIT Vs. Deshiya

Vidya Salal Samiti [ITA No.1133/2008 [PB-114-121]. Therefore, Rule

2BBB introduced with effect from 12.10.2014 is not applicable for the

year under consideration. In view of these facts and circumstances,

the reopening in the instant case amounts to change of opinion and

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it is based on audit objection and as no new tangible material has been brought on record. Therefore, we hold that the reopening of assessment was not valid; accordingly, the same is quashed. In view of this, Ground No.1 to 6 & 8 of assessee’s appeal are allowed.

Sd/- Sd/- (AMIT SHUKLA) (O.P.MEENA) सद�यकेसम� /ACCOUNTANT MEMBER) (�याियक सद�यतथा सद�यतथा/JUDICIAL MEMBER) (लेखा लेखा सद�यकेसम� नई �द�ल� /New Delhi, �दनांक Dated: 18th November, 2019/S.Gangadhara Rao, Sr.PS (�याियक (�याियक (�याियक सद�यतथा सद�यतथा लेखा लेखा सद�यकेसम� सद�यकेसम� Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, New Delhi